A Practitioner's Guide to Proposed Rule Revisions

In June 2016 the State Bar of California Board of Trustees authorized the release of proposed new and amended California Rules of Professional Conduct for public comment period. The deadline for comments is September 27, 2016. Standing on the shoulders of the first Commission for the Revision of the Rules of Professional Conduct appointed in 2001, the Second Commission (RRC2) produced a critical, from-the-ground-up, no-holds-barred revision of the California Rules of Professional Conduct. Every California lawyer has a stake in the outcome. 

The last full overhaul of the current rules occurred in 1989 and 1992.  Since then the rules have not kept pace with ongoing developments in the law of professional responsibility. In the view of the Supreme Court of California, the rules are also out of step with the rest of the country. The Court directed RRC2 to eliminate unnecessary differences between California’s rules and those used by preponderance of the states, which in effect are the American Bar Association’s Model Rules of Professional Conduct. While the proposed rules incorporate California case law, structurally they have been renumbered to follow the Model Rules. The Professional Responsibility and Ethics Committee (PREC) reviews proposed rule changes and makes recommendations to LACBA’s Board of Trustees for appropriate action. Posted on PREC’s web page are the Committee’s recommended comments on 25 of the 68 proposed rules.

The State Bar’s public comment website is an excellent resource that provides a redlined draft and executive summary for each proposed rule, as well as a numbering cross-reference table. Still, issues that could impact daily practice may not be obvious from a quick review of rule titles or summaries. Following is a practitioner’s guide to some of the more interesting issues presented by the proposed rules. (Individual rules are referenced by their proposed number followed in parentheses by the current number.)

Retainers and Flat Fees. Proposed rule 1.5 (4-200), Fees for Legal Services, defines true retainers and flat fees, and it describes what client disclosures and agreements are necessary to effectuate each. When legal fees are paid in advance of services and do not meet the true retainer or flat fee requirements, proposed rule 1.15 (4-100), Safekeeping Funds & Property of Clients and Other Persons, would require that they be held in the lawyer’s client trust account as advance fees; proposed rule 1.16 (3-700).

Declining or Terminating Representation, would require the lawyer to refund such fees as unearned if the lawyer-client relationship ended before services were fully performed. See PREC’s comment on proposed rule 1.15, noting that current rule 4-100 does not require advance fees to be held in trust.

Probate, Trusts and Estates. Proposed rule 1.8.9 (4-300), Purchasing Property at a Foreclosure or Sale Subject to Judicial Review, would prohibit purchase of such property by lawyers acting as attorneys or fiduciaries, as well as by other individuals associated with the matter. The revision would leave the current rule essentially unchanged. However, the absolute prohibition contained in both the proposed and current rules can conflict with Probate Code sections 9880-9885. Under certain circumstances, the statute permits probate sales that would violate the current and proposed rules. The revision process provides a unique opportunity to resolve the conflict Probate Code that has not yet been exploited.  Another proposed rule, 1.14 (3-100), Client with Diminished Capacity, outlines a permissible course of protection action that lawyers representing vulnerable clients may take, so long as certain conditions are met that preserve confidentiality and establish the client’s consent to such action. See PREC’s comment on proposed rule 1.14 suggesting language change clarifying that such protective action would be permissive rather than mandatory.

Sex with Clients. Proposed rule 1.8.10 (3-120), Sexual Relations With Client, would adopt the standard of Model Rule 1.8(g), which prohibits such relations unless they existed when the attorney-client relationship commenced. See PREC’s comment on proposed rule 1.8.10, which opposes the absolute restriction and favors current California law prohibiting lawyer-client sexual relations that are based on coercion, undue influence, or intimidation.

Timely Prosecution of Litigation. Proposed rule 3.2 (new), Delay of Litigation, would prohibit a lawyer from using means “that have no substantial purpose other than to delay or prolong the proceeding or to cause needless expense.” See PREC’s comment recommending alternative language from Model Rule 3.2 which would instead impose an affirmative duty to make reasonable efforts to expedite litigation.

Advertising and Solicitation. The proposed revisions separate issues addressed in current rule 1-400 into five new rules that are based on the Model Rules: 7.1, Communications Concerning a Lawyer’s Services; 7.2, Advertising; 7.3, Solicitation of Clients; 7.4, Communications of Fields of Practice and Specialization; and 7.5, Firm Names and Letterheads. While the proposed rules would update current rule 1-400 (which was last amended in 1997), questions remain as to whether any rules of professional conduct in this area are necessary or appropriate in light of California statutes such as Business & Professions Code sections 6150-6156, Unlawful Solicitation and 6157-6159.2, Legal Advertising. Arguably, the proposed rules complicate regulation without enhancing public protection. For example, proposed rule 7.3 would prohibit solicitation by “real-time electronic contact,” a term that is undefined. Lawyers who rely on social media for practice development may find the proposed rules more restrictive than current rule 1-400. Yet the greatest risk of over-engineered regulation in this area may not be that lawyers have a higher exposure to discipline (in practice, the State Bar rarely prosecutes violations under 1-400), but that it chills communications concerning the availability of legal services, and with it, access to justice.

Discrimination. Proposed rule 8.4.1 (2-400), Prohibited Discrimination, Harassment and Retaliation, has stimulated much controversy without being inherently controversial. This is the only rule for which two versions, labelled ALT1 and ALT2, were released for public comment. Current rule 2-400 has prohibited unlawful discriminatory conduct related to the practice of law since 1994.  At issue is its requirement that, before disciplinary charges may issue, a separate tribunal must find that discrimination has occurred and that appeals must be exhausted or the time for appeal expired. Proposed rule 8.4.1 [ALT1] would eliminate the precondition, and 8.4.1[ALT2] would limit the precondition to an original ruling by another tribunal.  In effect, the precondition has rendered current rule 2-400 virtually unenforceable, while the prospect of its removal has raised the most primal of lawyers’ instincts—preservation of due process. The ensuing discussion has resulted in candid, sometimes painful, re-examination of the profession’s commitment to the elimination of bias.  See PREC’s comment in support of 8.4.1[ALT1].

The above are highlights from a much larger dialogue about the values and the future of the legal profession in California as expressed in the rules of professional conduct. PREC’s recommended comments do not become LACBA’s formal position on the proposed rules unless and until they are adopted by the Board. LACBA members can add their input to the Board on PREC’s comments or on any other proposed rule revisions by sending an e-mail to TSchmid@tjslawpolicy.com on or before Monday, September 12, 2016. The State Bar will also accept Individual submissions through its public comment website until the September 27 deadline.   

By Teresa J. Schmid, Chair of the Los Angeles County Bar Association’s Professional Responsibility and Ethics Committee